Medway Council's chief executive has defended a decision to pay £300,000 to the authority's trading arm to recruit social workers.

Neil Davies was responding to the Towns' Labour group which has labelled the move as "extraordinary".

Medway Commercial Group (MCG) is currently under police investigation after concerns were raised about activities last year.

Labour asked Mr Davies why the firm was chosen, whether the contract was put out for open tender and could it be considered value for money.

Cllr Clive Johnson, shadow cabinet member for children's services, said the move was "shocking".

But Mr Davies has responded saying the contract was approved by cabinet and was in line with the authority's policy of using MCG for recruitment.

The criminal probe into MCG's work practices follows an internal review carried out by Medway Council which highlighted a projected £1 million loss.

Cllr Johnson said: “Now, at a time of deepening financial crisis for the council as a result of the Covid-19 emergency, and with children's services needing all the financial and other resources they can get to turn round last year's 'Inadequate' Ofsted judgement, we find MCG receiving £300,000 of council funding.”

Labour leader Cllr Vince Maple said: “We already have serious questions to ask about MCG and the details of the extraordinary arrangement, which are only exacerbated by the news of the £300,000 payment.

“I have written to council officers to establish why MCG are needed for this work, and how this deal represents value for money to the people of Medway.”

MCG was taken on by the authority in 2016 to carry out some services at a cheaper rate against a background of swingeing government cutbacks.

The company initially faced public outcry for its failing CCTV system across the Towns which found more than half of cameras were left beyond repair.

It was later stripped of its contract to oversee a £25 million independent special school in Gillingham amid worries over competence and experience.

In February last year, a senior employee was suspended from duties and deputy council leader Cllr Howard Doe took over as chairman.

The ongoing 18-month council inquiry has included an audit of accounts.

Last July, it was reported MCG, which is based at the Innovation Centre, near Rochester Airport, made an actual loss of £667,000 in 2018/19 and was set for a projected loss of £400,000 in 2019/20.

A report also found a number of additional projects "had been progressed which were outside the core business and had not provided an adequate return on investment". These were ceased or transferred following the findings.

In a written response, Mr Davies said the 3% fee covered direct staffing costs, overhead "plus an element of profit".

He said: "I would like to add, should the council, as the key shareholder, wish to make changes to the range of services undertaken by Medway Commercial Group at any stage in the future, this will be exercised by a decision taken at cabinet."

Meanwhile, speaking about the investigation, police spokesman James Walker said: "There is no update at the moment.

"There have been no arrests and inquiries are ongoing."

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